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The London Metal Exchange has been handed an unexpected advantage over its New York rival by Donald Trump’s erratic trade policy.
The US president’s on-again, off-again tariffs on imports of copper have triggered wild price swings on New York’s Comex exchange and continue to skew prices for future deliveries, analysts say, because contracts there include any duties or other taxes payable in the US.
In contrast, the LME, the world’s biggest base metals exchange, deals in copper stored worldwide in bonded warehouses before taxes become due, to deliver what chief executive Matthew Chamberlain described as a “clean, global price” exempt from tariff volatility.
The result has been a big shift in business to London. Trading volumes this year at the LME — which has spent the past three years trying to recover from its calamitous nickel crisis of 2022 — have risen for its key base metals contracts. Average daily volumes for copper futures are up 4 per cent in the year to date from the same period in 2024.
At the same time, copper trading volumes at the smaller Comex, part of the CME Group, fell 34 per cent in the first nine months of this year from a year earlier, largely because of confusion over tariffs.
Traders initially expected Trump’s tariffs to cover refined copper but the duties announced in late July exempted it — and doubly surprised markets by nevertheless hitting semi-finished products, such as copper pipes and wires, and so-called derivate products, such as pipe fittings and cables.
Chamberlain said the LME’s ability to provide prices that do not bake in the impact of tariffs had “worked well”.
“We try as much as possible through our contract structure to insulate our global price from the technical volatility of any one country’s tariff regime,” he said, speaking on the sidelines of the Financial Times’ Metals and Mining Summit this month.
Marc Bailey, chief executive of metals brokerage Sucden Financial, said the volatility caused on Comex meant some of his firm’s clients no longer traded there.
“The LME is definitely benefiting because it’s exempt, by design, from tariffs,” he said.
The exchanges have stepped up their rivalry in recent years, with the LME and the CME Group — which in addition to base metals trades gold, oil and agricultural commodities — both seeking to capitalise on growing demand for base and battery metals including copper.
The copper market has attracted particular attention this year, after a string of disasters at major mines helped to drive the metal’s price to near-record highs of more than $11,000 a tonne in recent weeks.
“It used to be very much a thing, that the LME felt under threat [from Comex],” said Guy Wolf, head of market analytics at commodities broker Marex. Now, he added, that kind of talk is in the past.
After its 2022 crisis — when the LME cancelled eight hours of nickel trades during a market panic and has since faced years of legal challenges over its decision — many traders questioned whether the exchange would recover. Its US rival tried to seize the opportunity to gain ground by launching contracts in battery metals including lithium and cobalt.
But this year, with commodity markets disrupted by Trump’s erratic policymaking, the LME has benefited from its bonded warehouse system.
Metal stored in LME warehouses in countries including the US is deemed to be in free-trade zones where goods are stored on a “duty unpaid” basis. Comex offers trading on a similar basis for some metals but not copper, which is stored in Comex warehouses on a “duty paid” basis, meaning all taxes must be paid before the metal enters its facilities.
As a result, traders rushed to import copper to Comex warehouses this year before the expected tariffs came in, with the sudden surge in demand driving the premium paid by Comex buyers over the LME price to a record high of about $3,000 a tonne.
On two occasions, the Comex copper price moved substantially in a matter of minutes, as traders second-guessed what tariffs might be coming, according to Marex analysis. Comex prices subsequently tumbled when the tariff on the refined metal failed to materialise.
CME Group conceded “high volatility in the cross-Atlantic spread” was having an impact, but added: “Our metals markets continue to support clients at a time of increased uncertainty.”
However, Wolf at Marex said even now there is a premium for Comex copper over the LME price in futures contracts, suggesting traders are still pricing in a risk that the tariff net will be widened to take in the refined metal.
“The risk has not gone away. It is still not safe, unless you know what is going to happen,” he said. “People can’t deal with that level of headline risk — no one can.”